Exchange Wagering Rules Approved by CHRB

Rules governing exchange wagering gained initial approval from the California Horse Racing Board at its meeting Sept. 20, more than a year after the commission had announced its intention to promulgate them.

Meeting at a conference center next to Fairplex Park in Pomona, the board unanimously approved the series of 22 rules for an expedited 15-day public comment period. At the conclusion of that comment period, which should come in time for the Oct. 18 agenda at Santa Anita Park, the board could give its final approval.

The initial set of rules had been sent out for a 45-day public comment period in March. After a follow-up ad hoc committee meeting in August, some changes in language were suggested and made. Board chairman Keith Brackpool indicated that since they were considered minor in nature, the shorter waiting period could be invoked.

Approval, assuming it is given next month, would not be the end of the process. The rules would then go to the state's Office of Administration Law for review, a period that could take up to two months, and then on to the Secretary of State for final confirmation.

Even with the cumbersome process, California will become the first state to have exchange wagering, which is defined in the state Business and Professions Code as "a form of pari-mutuel wagering in which two or more persons place identically opposing wagers in a given market."

Under exchange wagering, customers can post odds and accept wagers from other customers on whether a horse will win or lose a race. It opens the door for several new types of wagers, such as betting on in-progress races.

Exchange wagering was introduced in 2000 in the United Kingdom, where it has proven quite popular. Betfair, the British-based Internet wagering company that owns American advance deposit wagering giant TVG, has strongly pushed for exchange wagering in California, where it was signed into law two years ago. State racing officials see the wagering concept as a way to attract new interest in the sport from a younger audience.

The Thoroughbred Owners of California, which represents horsemen, must approve any negotiations to bring exchange wagering to the state's major racetracks. The TOC, citing concerns over integrity and whether horsemen would get an equitable share of revenue from exchange wagering, announced earlier this year that it would not consider approving it until 2013.

TOC's move was harshly criticized by Betfair/TVG. Betfair Hollywood Park, which has a five-year naming rights deal with Betfair, and Del Mar have expressed support for exchange wagering. But without the TOC's support, only Los Alamitos Racecourse, which races mostly Quarter Horses, is prepared to conduct exchange wagering.

Integrity was at the core of one rule raised as an issue by CHRB commissioners. The concern was over a section dealing with prohibitions on wagers to lay a particular horse to lose.

Vice chairman David Israel, who chaired the ad hoc committee on exchange wagering, urged prohibiting board members, any person holding a valid CHRB occupational license, or an employee or contract employee of the board from making such a wager.

Israel said prohibiting lay wagers from that group of individuals was "a small price to pay for the integrity of the game. I think we have to lift whatever cloud of suspicion that there might be."

A more limited prohibition, proposed by commissioner Richard Rosenberg, was approved by the majority of the board. Rosenberg's version of the rule barred lay wagers from a horse's owner, the trainer, and his employees, authorized owner's agent, jockey or driver, jockey agent or valet, or veterinary staff providing services to the trainer.

"You can have all the rules in the world," said commissioner Jesse Choper in support of Rosenberg's position. "If someone is going to cheat, they're going to cheat."

"I actually take the perception problem very seriously but I turn it on its head a little," said Brackpool, who also supported the more limited prohibition on lay wagers. "I think one of the positive things about exchange wagering is that since everything is done electronically, we have a trail."

Carlo Fisco, an attorney representing the California Thoroughbred Trainers, said he "has ongoing concerns" with some of the other rules, which he indicated he would pursue with the OAL.

Richard Specter, an attorney representing Santa Anita Park and Golden Gate Gate Fields, questioned whether exchange wagering is truly pari-mutuel in nature. He noted that unlike other pari-mutuel wagers at racetracks, only residents of California or New Jersey can make exchange wagers.